Workers’ Share of Business Sector Income Has Declined by $1 Trillion Since 2000

If one were to just go by monthly jobs reports, the economy is healthier than ever. But while the economy is good for capital, it’s been terrible for workers for a long time.

As Representative Mo Brooks (R-Alabama) recently pointed out on his House.gov website, January marks the 100th straight month of job growth in the United States. President Trump boasted that while the jobs report may have been a “shocker” for his detractors, “it wasn’t a shocker to me.”

A more detailed gauge of economic health would be workers’ share of the income businesses have generated, as workers drive economic activity by spending their wages in their local economies. And according to the Economic Policy Institute (EPI), workers haven’t fared well for decades — particularly since the onset of the 21st century. In an analysis published earlier this week, the EPI acknowledged that while wages have grown by as much as three percent in a quarter, they’ve failed to keep up with inflation and productivity, meaning workers are getting less for their dollar than before:

3 percent growth for a quarter, however, should not constitute “mission accomplished” in the minds of macroeconomic policymakers like the Federal Reserve. In the long run, nominal wage growth should run at a rate equal to the Fed’s inflation target (2 percent) plus the long-trend growth in potential productivity (let’s call this 1.5 percent). This indicates that even the recent accelerations in wage growth leave us failing to meet these long-run goals.

Even more importantly, wage growth should run substantially above these long-run targets for a spell of time after long periods of labor market slack. The arithmetic reasoning for this is straightforward: any time wage growth runs slower than current rates of inflation plus productivity, the result will be labor compensation shrinking as a share of the economy.

While the graph above certainly shows how workers have seen their share of business income drop over the last 40 years, the drop-off has been significantly steeper since the George W. Bush administration. Between 2000 and today, workers have seen $1 trillion cut from their share of business sector income. As Mother Jones’ Kevin Drum recently wrote, this basically means that corporate CEOs have added $1 trillion to their compensation over the last 20 years:

“If you’ve become jaded by numbers this huge and have no idea what they mean on a human scale, it’s simple: this works out to something in the ballpark of $7,000 per worker. If we could just get back to the level of 80s and 90s, we’d all be making about $7,000 more per year,” Drum wrote. “This is not a huge ask. It’s not like trying to bring back the postwar Golden Age. We’re talking about something that was common as recently as 20 years ago.”

A side result of workers losing an average of $7,000/year is that more and more people are taking on second jobs just to make ends meet — possibly another contributor to consistent month-over-month job growth. Bureau of Labor Statistics data as of January 2019 shows that 7.7 million Americans — more than five percent of the U.S. workforce — work multiple jobs.

Tom Cahill is a contributor for Grit Post who covers political and economic news. He lives in Bend, Oregon. Send him an email at tom DOT v DOT cahill AT gmail DOT com.

Categories

About Grit Post

Gritpost.com is real news for the working class. We focus on covering political, economic, and policy-related stories that affect American workers and their communities. Our team is based around the country.